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Funding Technology: E-rate Reboot Removes Broadband Hurdles

It has been more than a year since the FCC modernized E-rate. Here's how the latest developments are affecting schools.

By Dian Schaffhauser

03/24/16

According to the latest "State of the States" report from Education Superhighway, 77 percent of districts are meeting the FCC's minimum Internet goal of 100 Kbps per student. That's more than double the number of districts meeting the same goal in 2013. However, if you're in one of the 23 percent of school systems still not meeting even the minimum, the vision of delivering personalized digital learning opportunities to students may have the composition of a mirage — always on the horizon and never within your grasp.

How E-rate Works

E-rate, which is funded out of the "federal universal service fee" tagged onto phone and Internet bills, provides a discount program for public and non-profit schools as well as libraries to obtain high-speed Internet access and telecommunications at affordable rates. The amount of discount a district is allowed is based on two factors: the percentage of low-income students served in the district and whether it serves a rural or urban area. Once the district has figured out what eligible services it needs, it fills out a Form 470 and submits it to USAC to apply for the funding. If USAC issues a funding commitment, the school system can start receiving discounts on the services approved. Reimbursement is done by USAC to cover the discounted amount. The non-discounted portion is covered by the school system itself.

However, when the Federal Communications Commission (FCC) increased E-rate's annual funding by $1.5 billion at the end of 2014, a major hurdle — lack of funding — was removed that prevented many schools from having adequate broadband and WiFi access. It was time to see if the mirage would take physical form.

More than a year after that E-rate "modernization," the results are real, and they have dazzled.

"This isn't a typical Washington, D.C. 'enact something,' and then five years later you start to see it play out," observed Funds For Learning CEO John Harrington. "This is literally being felt today in classrooms and in libraries across the country, which is a really good success story." Harrington's company serves as an advisor to E-rate applicants.

Extra Money Makes a Difference
First, there were more funds committed to applicants in 2015 than there have ever been, at least since 2012: $3.9 billion. (In 2012 a total of $4 billion was committed, exceeded in 2010 with a $4.3 billion level of commitment.)

But more important, said Harrington, was the turnaround time and the type of services being funded. The Universal Service Administrative Company (USAC), which handles management of E-rate for the FCC, has "never gotten this much money committed this quickly," he noted. On top of that, the funding commitments cover both off-campus Internet access and telecommunications services (the "category 1" services) and the on-campus piece, the internal connections, which falls onto the list of "category 2" services.

"That is what has been missing since 2012," he emphasized. By the time category 1 funding was doled out, there was nothing left for category 2. "For most schools and libraries that was almost a deal breaker. It's great if you can bring fast connections to the school building. But if there's no way to access that, if there's no WiFi signal to connect to, then what good is it?"

In other words, that extra money offered up by the FCC has come in handy. Of the $3.9 billion locked up in 2015, $1.517 billion was committed to the components of high-speed broadband connectivity and broadband internal connections, just like the agency promised.

Analysis by Funds For Learning, shows that applications for 2016 are dominated by the need to purchase switches (referenced in 2,336 category two requests as of January 8, 2016), wireless access points (2,015), cabling (1,695), wireless controllers (1,059) and firewall services and components (1,037).

As a spending category, switches and routers are the biggest need. For 2015, the pre-discount demand for those totaled $888 million. "That makes sense. Those are more expensive than WiFi boxes," Harrington noted. Compare that to 2013 and 2014, when funding on either category was zero. "So we went from zero to a billion dollars," he added. And already 84 percent of applicants have begun their implementation work.

More Deliberate Planning
Another change introduced for 2015 was the "rolling funding cycle," which granted every school district that applied $150 per student multiplied by its discount rate, to be spent on infrastructure needs over the course of five years. (For the tiniest schools the change set minimum funding of $9,200.) Suddenly, there was no need to rush to cover every possible upgrade required now or in the near future. What that change brought was better planning on the part of the district.

As Harrington explained, the average district discount was 76 percent in 2015, which meant on average a school system would have $114 to spend over five years per student on bolstering its internal broadband set-up.

"One of the challenges in the past with the E-rate program is [that] because no one knew if they'd get funding for internal connections or not, on the years they thought they could, well, then they would put in everything. It drove the requests up higher," he said. By providing assurance that the funding would be available whenever it was needed, it took "some of the pressure off." Schools were freed up to only apply for what they really needed. The result: "It helps them plan and smooth out the workflow."

For the first funding year of that change, which ended in March 2015, only about 15 percent of the schools really jumped in and maxed out their budgets at sites, Harrington said. The rest "held back." In a survey conducted last spring of applicants, Funds For Learning, found that the majority were planning to do their "major hardware refreshes" this year and next.

Faster Approval in Spite of System Problems
While the extra E-rate funding has proven to be a "shining success," as Harrington put it, the FCC's pledge to the streamline its application processes and move to self-service hasn't quite come to full fruition. Yes, the approval process has sped up considerably. But USAC's E-rate Productivity Center (EPC), an account and application management portal, has been a "challenge." "Applicants can get into it, but it's very buggy [and] inconsistent." For example, he recounted how some applicants would enter their data, hit save, and come back later to find the form gone.

The delays caused by those system problems are playing havoc with the 2016 funding year, Harrington observed. As of mid-January, USAC still wasn't sure when its filing window would close. "As we approach the 2016 funding year, we are balancing the benefits of setting specific dates with the desire to deliver the best possible experience for applicants in the new EPC environment," said Mel Blackwell, vice president of schools and libraries for USAC, in a public statement. USAC expected to announce firm dates in early January "based on our progress in development and testing during the next few weeks."

The Next Area for E-rate Reform
Harrington predicts that the 2016 funding year could see "upwards" of $2 billion committed for internal connection projects. Under the modernization of E-rate, the system will be able to accommodate those requests without a hitch. In fact, it could handle every one of the nearly 100,000 public schools in the country applying for these funds. Yet it won't.

Whether it's a lack of faith that they'll qualify at any discount level or that they've been burned in the past, some districts just won't bother even setting up a mandatory account, which starts the application process. As of last October, Harrington had estimated, only two thirds of potential applicants (64 percent) had done so.

"I still talk to schools that don't understand that there are funds available for internal connections. If they have needs for on-campus computer networks, they should seek those funds," Harrington insisted. "They have a responsibility, I believe, to submit those applications."

Reform of E-rate isn't complete, Harrington added. "All the pieces are there — the technology and the money." Now, more regulations need adjusting. In particular, his organization would like to see bureaucratic hurdles removed to address the "homework gap," making sure students have access to connectivity when they head home by allowing districts to partner with others in setting up WiFi everywhere their students live.

"Your normal textbook works when it gets home. But without [access to WiFi], that digital resource almost becomes a liability," Harrington said. "If we're really talking about anytime/anywhere learning, then it's actually anytime/anywhere connectivity. And we have to step up to that challenge and not do a disservice to the students by giving them these devices that only work a few hours out of the day."

Although it'll be a while before the impact of E-rate modernization can be fully measured, Harrington expects good news. "Almost every school in America is counting on the E-rate program for their Internet access. You've got to have that piece in place before you can really come in with some of the ed tech initiatives, the personalized learning. So they got the timing right. The FCC had to do what it did last year and get this billion out in infrastructure in order for some of that reform and those new initiatives to have the oxygen they need to move forward."

How to Optimize E-rate

David Schofield and Wayne Weber, partners in Atlanta-based Network Sourcing Advisors (NSA), believe that a lot of E-rate spending is wasted because schools aren't going about their planning in the best way. "If everybody got the best rates they could, there would probably be additional funds and more people would get money," said Schofield.

The stories they share point out the problems. First, there's the district with 10 gigabit internal networks between schools and only 100 megabit connections going up to the Internet. "And they wonder why everything is so slow," he mused.

Then there's the district that spent $20,000 a month for a broadband hookup that was only "in the hundreds of megabits." NSA's research found that the cable company with the franchise for that area had a "social contract" that promised to wire all schools at no charge. "When we were done with them, they had 10 gigabit for less than a third of what they [had been] paying a carrier for years," Schofield asserted.

And in plenty of other scenarios the district simply forgot what it was paying for — including services no longer used but still being billed for and paid by accounting month after month with no real oversight.

Weber offers some basic advice that will help any school system maximize its outlay for telecommunications, including its high-speed broadband.

Take Inventory
First, understand what you have. That means taking stock of baseline of voice and wireline connectivity, including plain old telephone service (POTS), Internet services, private line services and long distance. "Build that in detail in a spreadsheet and then really examine it," advised Weber. "Focus on what you have, then on what you need."

Plan with E-rate in Mind
While the E-rate modernization addresses a great need for districts — internal connectivity — ultimately, E-rate will reflect what the carriers themselves want to sell, Weber said, who called it "a big stimulus package for the carriers in a way." So as you're planning, he suggested, keep in mind not just what's going on in the marketplace, but also what the E-rate regulations are pushing. These days, it's IP services for everything.

Get Creative
"You have to really believe that you don't have to accept status quo," Weber insisted. It may be time to give up that service provider that has been delivering services to your district for the last decade. Consider other options: teaming up with your city, county or state to get onto their contract and take advantage of lower pricing; seeking a new aggregator that can deliver local phone, Internet services and long distance in a single package; or joining a regional service provider that can get better pricing for its members by virtue of its size.

Get Professional Help with Negotiation
The best discounting comes at contract signing time, Weber observed. "But due to tariffs, it inches its way back up. Before you know it, by the end of your contract, you'll be paying more." It's not unusual, he added, to see services increase by 17 to 23 percent a year. That's where competitive benchmarking will come in handy — to understand what others are paying for comparable services.

Sign on for the Short-term
Weber encouraged districts to keep contracts to no longer than three years and to include technology refresh and competitive review clauses that require the service provider to re-evaluate what the customer is getting for its money. "What you want is to have a contract where you get some leverage," Weber said.

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